Lithia Motors Reports Record Revenues for the 3Q 2006
MEDFORD, Ore. MEDFORD, Ore.--Lithia Motors, Inc. today announced that third quarter 2006 sales increased 3% to $880.4 million as compared to $858.9 million in the same period last year. New vehicle sales increased 1%, used vehicle sales increased 6%, finance/insurance sales increased 5% and parts/service sales increased 12%.
Third quarter 2006 net income from continuing operations was $12.8 million as compared to $18.1 million in the third quarter of 2005. Diluted earnings per share from continuing operations, including the $0.03 effect of accounting for equity compensation under FAS123-R, were $0.60.
Third quarter 2006 earnings per share from continuing operations, excluding the effect of accounting for equity compensation under FAS123-R, were $0.63 as compared to $0.85 in the same period last year.
Sid DeBoer, Lithia’s Chairman and CEO, commented, “Recently Lithia reached a milestone of 100 stores over a period of 10 years as a public company. We are excited about this achievement, although we are only just beginning to realize some of the growth and operating opportunities that lay ahead of us.”
“Our third quarter revenues were up 3% compared to last year’s third quarter. Although this is due to acquisitions, it is still noteworthy considering the very difficult comparison with the third quarter of last year where we saw exceptionally strong sales driven by effective employee pricing. Incentives were not as effective in the third quarter this year.”
“While total revenues were up, third quarter earnings were down year over year due to a combination of factors; high inventory levels and higher interest rates impacted our bottom line by approximately 12 cents per share for the quarter. This excludes inventories from acquisitions over the prior year. We also experienced increased costs resulting from company-wide operational initiatives in the quarter. We estimate expenses for all these new initiatives to be in the range of seven to eight cents per share for the full-year 2006. Additionally, for most of September, we were unable to sell the majority of our Dodge RAM light duty pickups, one of our core products, due to a “sell hold” from the manufacturer that is related to a safety restraint system in these vehicles.”
“Total same store sales declined 3.5% against a backdrop of 9.1% growth in the third quarter of last year. New vehicle inventories remained above historical average levels at the end of September, but are down $230 million sequentially from the second quarter. We expect them to continue to decline by year-end. Fuel costs have declined recently and that should benefit consumer sentiment and help increase truck sales. Interest rates have risen steadily for the last two years and with interest rates currently steady, floorplan interest costs should stop increasing in the year ahead,” concluded Mr. DeBoer.
For the nine-month period ending September 30, 2006, total sales increased 9% to $2.48 billion from $2.27 billion in the same period last year. New vehicle sales increased 10%, used vehicle sales increased 9%, finance/insurance sales increased 12%, and parts/service sales increased 12%.
For the first nine months, Lithia’s net income from continuing operations was $35.1 million as compared to $41.7 million in the first nine months of 2005. Diluted earnings per share from continuing operations, including the $0.09 effect of accounting for equity compensation under FAS123-R, were $1.65.
For the first nine months of 2006 earnings per share from continuing operations, excluding the affect of accounting for equity compensation under FAS123-R, were $1.74 as compared to $1.98 in the same period last year.
Jeffrey B. DeBoer, Senior Vice President and CFO added, “In the past four months we have completed four acquisitions: a Chrysler store in Ukiah, California; two stores in Grand Forks, North Dakota with a combination of import and domestic brands; and more recently, BMW and Porsche stores in Seaside, California and BMW and Mercedes Benz stores in Des Moines, Iowa. These more recent acquisitions have provided a good demonstration of our continuing brand diversification efforts. Year to date we have completed acquisitions with approximately $390 million in annualized revenues, and we plan on continuing our normal acquisition pace in 2007.”
"Our guidance for the full-year 2006 and 2007 is included in the table below. For the full-year 2007 we are giving guidance for a flat year as a number of key items are material to the year ahead. Company health and benefit plan costs will be increasing, negatively impacting earnings by 10 to 12 cents per share. We will also continue with our special operational projects and initiatives which include: Office Automation; Lithia’s Store Management System; Human Development Systems and our Assured Used Vehicle Program. Long-term we expect these projects to reduce the company’s SG&A expense and allow the stores to focus more on customers which will help drive long-term sales growth. We also expect that in the coming year, our domestic product mix will continue to negatively impact earnings, however, we believe that the restructurings now underway at the domestic manufacturers along with changes in mix and product improvements will help us in the future.”
“We are excited about the start up of our first independent used vehicle retail outlets in 2007. Start up costs for this initiative will impact earnings by approximately 10 cents per share. Once established, we expect that each independent used vehicle store will reach monthly operational profitability within 12 months of opening,” concluded Jeffrey B. DeBoer.
Guidance Guidance
Earnings per Share FY 2006 FY 2007
------------- -------------
From Continuing Operations: $1.95 - $1.99 $1.90 - $2.10
The company currently has a 1,000,000 share repurchase program in place. Prior to the beginning of 2006, 60,231 shares had been purchased. In the past few months the company purchased 196,600 shares, leaving 743,169 shares still available for repurchase under the program.
Conference Call Information
Lithia Motors will be providing more detailed information on the results for the third quarter 2006 in its conference call scheduled for 2 p.m. PT today. The call can be accessed live by calling 973-633-1010. To listen to a live webcast or hear a replay, log-on to: www.lithia.com – go to Investor Relations – and click on the Live Webcast icon.
About Lithia
Lithia Motors, Inc. is a Fortune 700 and Russell 2000 Company. Lithia sells 26 brands of new vehicles at 102 stores which are located in 42 markets within 15 states. Internet sales are centralized at www.Lithia.com. Lithia also sells used vehicles; arranges finance, warranty, and credit insurance contracts; and provides vehicle parts, maintenance, and repair services at all of its locations. Lithia retailed 103,333 new and used vehicles and had $2.9 billion in total revenue in 2005.
Forward Looking Statements
This press release includes forward looking statements within the meaning of the “Safe-Harbor” provisions of the Private Securities Litigation Reform Act of 1995, which management believes are a benefit to shareholders. These statements are necessarily subject to risk and uncertainty and actual results could differ materially due to certain risk factors, including without limitation economic conditions, acquisition risk factors and others set forth from time to time in the company’s filings with the SEC. Specific risks in this press release include items which impact earnings, anticipated revenues of recently acquired and projected new store acquisitions, anticipated profitability of independent used vehicle stores and projected full-year 2006 and 2007 earnings per share guidance.
Additional Information
For additional information on Lithia Motors, contact the Investor Relations Department: (541) 776-6591 or log-on to: www.lithia.com – go to Investor Relations
LITHIA MOTORS, INC.
(In Thousands except per share and unit data)
Unaudited
Three Months Ended
September 30, $Increase %Increase
2006 2005 (Decrease) (Decrease)
New Vehicle Sales $515,059 $510,541 $4,518 0.9%
Used Vehicle Sales 239,387 226,518 12,869 5.7
Finance & Insurance 33,982 32,462 1,520 4.7
Service, Body & Parts Sales 90,108 80,786 9,322 11.5
Fleet & Other Revenues 1,836 8,548 (6,712) (78.5)
-------- -------- -------- -------
Total Revenues 880,372 858,855 21,517 2.5
Cost of Sales 733,116 717,591 15,525 2.2
-------- -------- -------- -------
Gross Profit 147,256 141,264 5,992 4.2
SG&A Expense 109,122 98,588 10,534 10.7
Depreciation/Amortization 4,411 3,624 787 21.7
-------- -------- -------- -------
Income from Operations 33,723 39,052 (5,329) (13.6)
Flooring Interest Expense (10,027) (5,534) 4,493 81.2
Other Interest Expense (3,819) (3,037) 782 25.7
Other Income, net 188 186 2 1.1
-------- -------- -------- -------
Income from continuing operations
before income taxes 20,065 30,667 (10,602) (34.6)
Income Tax Expense (7,289) (12,551) (5,262) (41.9)
Income Tax Rate 36.3% 40.9%
-------- -------- -------- -------
Income from continuing ops. 12,776 18,116 (5,340) (29.5)
Income (Loss) from discontinued
operations, net of income taxes (81) (484) (403) (83.3)
Net Income $12,695 $17,632 ($4,937) (28.0)%
========= ======== ======= ========
Diluted Net Income per share:
Continuing Operations $0.63 $0.85 $(0.22) (25.9)%
Effects of FAS123-R (0.03) -
Diluted Net Income per share
after effect of FAS123-R: $0.60 $0.85 (0.25) (29.4)%
Discontinued Operations - (0.02)
-------- -------- -------- -------
Net Income per share $0.60 $0.83 (0.23) (27.7)%
========= ======== ======= ========
Diluted Shares Outstanding 22,128 21,882 246 1.1%
Increase Increase
Unit Sales: 2006 2005 (Decrease) (Decrease)
New Vehicle 18,829 18,682 147 0.8%
Used - Retail Vehicle 11,925 12,057 (132) (1.1)
Used - Wholesale 7,686 7,091 595 8.4
Total Units Sold 38,440 37,830 610 1.6
LITHIA MOTORS, INC.
Three Months Ended
September 30, $Increase % Increase
Average Selling Price: 2006 2005 (Decrease) (Decrease)
---------------------- ---- ---- ---------- ---------
New Vehicle $27,355 $27,328 $27 0.1%
Used - Retail Vehicle 16,223 15,502 721 4.7
Used - Wholesale 5,976 5,586 390 7.0
Key Financial Data:
-------------------
Gross Profit Margin 16.7% 16.4%
SG&A as a % of Gross
Profit 74.1% 69.8%
Operating Margin 3.8% 4.5%
Pre-Tax Margin 2.3% 3.6%
Gross Margin/Profit Data 2006 2005
------------------------ ---- ----
New Vehicle Retail 7.7% 7.7%
Used Vehicle Retail 14.5% 15.8%
Used Vehicle Wholesale 0.9% 1.7%
Service, Body & Parts 49.8% 48.1%
New Retail Gross
Profit/Unit $2,101 $2,112
Used Retail Gross
Profit/Unit $2,348 $2,448
Used Wholesale Gross
Profit/Unit $56 $93
Finance & Insurance/
Retail Unit $1,105 $1,056
Same Store Data 2006 2005
--------------- ---- ----
New Vehicle Retail Sales (5.8)% 9.3%
Used Vehicle Sales
(includes Wholesale) (1.0)% 10.2%
Total Vehicle Sales
(excludes fleet) (4.4)% 9.6%
Finance & Insurance Sales (2.6)% 8.5%
Service, Body & Parts Sales 3.6% 4.9%
Total Sales (Excluding
Fleet) (3.5)% 9.1%
Total Gross Profit
(Excluding Fleet) (3.5)% 7.0%
LITHIA MOTORS, INC.
(In Thousands except per share and unit data)
Unaudited
Nine Months Ended
September 30, $Increase % Increase
2006 2005 (Decrease) (Decrease)
New Vehicle Sales $1,438,930 $1,308,535 $130,395 10.0%
Used Vehicle Sales 679,374 624,609 54,765 8.8
Finance & Insurance 94,312 84,282 10,030 11.9
Service, Body &
Parts Sales 258,317 230,468 27,849 12.1
Fleet & Other Revenues 4,105 20,716 (16,611) (80.2)
--------- --------- -------- -------
Total Revenues 2,475,038 2,268,610 206,428 9.1
Cost of Sales 2,052,776 1,882,869 169,907 9.0
--------- --------- -------- -------
Gross Profit 422,262 385,741 36,521 9.5
SG&A Expense 317,375 281,043 36,332 12.9
Depreciation/
Amortization 12,669 10,418 2,251 21.6
--------- --------- -------- -------
Income from Operations 92,218 94,280 (2,062) (2.2)
Flooring Interest
Expense (25,573) (16,636) 8,937 53.7
Other Interest
Expense (10,791) (8,878) 1,913 21.5
Other Income, net 930 718 212 29.5
--------- --------- -------- -------
Income from continuing operations
before income taxes 56,784 69,484 (12,700) (18.3)
Income Tax Expense (21,662) (27,787) (6,125) (22.0)
Income Tax Rate 38.1% 40.0%
--------- --------- -------- -------
Net Income from
continuing ops. 35,122 41,697 (6,575) (15.8)%
Income (Loss) from discontinued
operations, net of
income taxes (1,452) (1,400) 52 3.7
Net Income $33,670 $40,297 ($6,627) (16.4)%
========= ========= ======== =======
Diluted Net Income per share:
Continuing Operations $1.74 $1.98 $(0.24) (12.1)%
Effects of FAS123-R (0.09) -
Diluted Net Income per share
after effect of
FAS123-R: $1.65 $1.98 (0.33) (16.7)%
Discontinued Operations (0.06) (0.07)
--------- --------- -------- -------
Net Income per share $1.59 $1.91 (0.32) (16.8)%
========= ========= ======== =======
Diluted Shares
Outstanding 22,120 21,765 355 1.6%
Increase Increase
Unit Sales: 2006 2005 (Decrease) (Decrease)
----------- ------ ------ --------- ---------
New Vehicle 52,346 47,147 5,199 11.0%
Used - Retail Vehicle 34,543 33,478 1,065 3.2
Used - Wholesale 19,537 18,338 1,199 6.5
Total Units Sold 106,426 98,963 7,463 7.5
LITHIA MOTORS, INC.
Nine Months Ended
September 30, $Increase % Increase
Average Selling Price: 2006 2005 (Decrease) (Decrease)
----------------------
New Vehicle $27,489 $27,754 ($265) (1.0)%
Used - Retail Vehicle 16,220 15,469 751 4.9
Used - Wholesale 6,095 5,821 274 4.7
Key Financial Data:
-------------------
Gross Profit Margin 17.1% 17.0%
SG&A as a % of Gross Profit 75.2% 72.9%
Operating Margin 3.7% 4.2%
Pre-Tax Margin 2.3% 3.1%
Gross Margin/Profit Data 2006 2005
------------------------ ---- ----
New Vehicle Retail 7.6% 7.9%
Used Vehicle Retail 15.2% 15.7%
Used Vehicle Wholesale 2.8% 3.2%
Service, Body & Parts 49.7% 48.7%
New Retail Gross Profit/
Unit $2,098 $2,193
Used Retail Gross Profit/
Unit $2,469 $2,430
Used Wholesale Gross Profit/
Unit $168 $188
Finance & Insurance/
Retail Unit $1,085 $1,045
Same Store Data 2006 2005
--------------- ---- ----
New Vehicle Retail Sales 3.1% 3.3%
Used Vehicle Sales
(includes Wholesale) 2.7% 4.2%
Total Vehicle Sales
(excludes fleet) 2.9% 3.6%
Finance & Insurance Sales 4.8% 3.6%
Service, Body & Parts Sales 5.4% 2.3%
Total Sales (Excluding Fleet) 3.3% 3.5%
Total Gross Profit
(Excluding Fleet) 2.5% 4.0%
LITHIA MOTORS, INC.
Balance Sheet Highlights (Dollars in Thousands)
September 30, 2006 December 31, 2005
Unaudited
------------------ -----------------
Cash & Cash Equivalents $41,329 $48,566
Trade Receivables(a) 99,935 106,443
Inventory 652,071 606,047
Assets Held for Sale - 27,411
Other Current Assets 13,971 15,781
-------- --------
Total Current Assets 807,306 804,248
Real Estate, net 293,904 255,372
Equipment & Leases, net 86,135 77,805
Goodwill, net 277,717 260,899
Other Assets 63,817 54,390
-------- --------
Total Assets $1,528,879 $1,452,714
========== ==========
Floorplan Notes Payable $537,557 $530,452
Liabilities held for sale - 22,388
Other Current Liabilities 117,745 95,560
-------- --------
Total Current Liabilities 655,302 648,400
Used Vehicle Flooring 71,000 -
Real Estate Debt 161,195 154,046
Other Long-Term Debt 92,473 136,505
Other Liabilities 57,802 54,130
-------- --------
Total Liabilities 1,037,772 993,081
-------- --------
Shareholders' Equity 491,107 459,633
-------- --------
Total Liabilities &
Shareholders' Equity $1,528,879 $1,452,714
========== ==========
______________
(a) Includes contracts-in-transit of $49,181 and $52,453 at September
30, 2006 and December 31, 2005 respectively.
Other Balance Sheet Data (Dollars in Thousands except per share data)
Current Ratio 1.2x 1.2x
LT Debt/Total Cap.
(Excludes Used -Vehicle Flooring
and Real Estate) 16% 23%
Working Capital $152,004 $155,848
Book Value per Basic Share $25.20 $23.97